Page 265 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes (ii) The liability of the shareholder in the company to pay calls on shares until fully paid up;
(iii) The right of the shareholder to transfer the shares subject to the articles of association (For
this purpose s.82 classifies shares as movable property transferable in the manner provided
in the articles);
(iv) Binding covenants on the part of the company as well as the shareholder, as given in the
Articles of the company.
Thus, a share of a company in the hands of a shareholder signifies a bundle of rights and
obligations.

Did u know? A share is not a negotiable instrument
Section 83 requires that each share in a company having a share capital must be distinguished
by its appropriate number. The Companies (Amendment) Act, 1999 amended s.82 to the
effect that for the word ‘shares’, the words ‘shares and debentures’ shall be substituted.

11.3.1 Share vs Share Certificate

A common man uses ‘share’ and ‘share certificate’ to mean the same. It is, therefore, important
to note the exact differences between the two. Section 82, in this regard describes a share as a
moveable property transferable in the manner provided by the articles of the company and s.84,
on the other hand, describes a ‘share certificate’ to mean a certificate, under the common seal of
the company, specifying any shares held by any member. Section 84 further suggests that a share
certificate shall be prima facie evidence of title of the member to such shares. Thus, whereas
‘share’ represents property, ‘share certificate’ is an evidence of the title of the member to such
property.

Each share bears a distinctive number and it is not the same as share certificate number, the two
are different. In fact, a share certificate may be an evidence of many shares, say 50,100 or even 1
lakh. Thus, whereas there will be only one number as the share certificate number for one
certificate, there will be as many distinctive numbers in respect of shares as are evidenced by the
share certificate.
Thus, the share certificate being prima facie evidence of title, it gives the shareholder the facility
of dealing more easily with his shares in the market. It enables him to sell his shares by showing
at once marketable title.
Also, a share certificate serves as an estoppel as to payment against a bona fide purchaser of the
shares from alleging that the amount stated as being paid on shares has not been paid. However,
a person who knows that statements in a certificate are not true cannot claim an estoppel against
the company.
11.3.2 Share vs Stock

The share capital of a company is divided into a number of indivisible units of specified amount.
Each of such unit is called a ‘share’. Thus, if the share capital of the company is ` 5,00,000 divided
into 50,000 units of ` 10 each, unit of ` 10 shall be called a share of the company.
The term ‘stock’ may be defined as the aggregate of fully paid-up shares of a member merged
into one fund of equal value. It is a set of shares put together in a bundle. The ‘stock’ is expressed
in terms of money and not as so many shares. Stock can be divided into fractions of any amount
and such fractions may be transferred like share. Such fractions, unlike the shares, bear no
distinctive numbers.

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